We are at the end of our discussion with regard to the fourth area of the five areas that make up every business in the world. This fourth area is the area of “billing.” As you know, the other four areas are: “Clients” or “customers”; “Administration”; “Getting the work done”; and “Collecting.”

This week we will continue to discuss the cumulative running year end reports we use in our office. They are as follows:

1. Production Totals: This form simply shows on a yearly basis individual lawyer’s production and responsible attorney time. This report is fascinating because it shows the actual dollars that have been produced over a long period of time. You can see very quickly over this period of time who are the producers year in and year out and who are the business getters year in and year out. If you only look at one year with regard to statistics, it’s clearly out of context. If you look at multiple years over a longer period of time, you can put everything into context, and you will be able to make much better business decisions. If a person has a particularly good year, it’s not necessarily the smartest thing to do to overly compensate them, because I think you will see that the trends indicate that the one year may have been an anomaly. Conversely, if somebody continues to have excellent years, year to year, you can rely upon that date and compensate people accordingly with regard to their draws. Remember, in my system everybody who is a biller is on the same exact formula in the law firm, from me all the way down to the legal assistant. If you are careful with regard to the way you set draws, everybody will understand that you are on somewhat of an “eat what you kill” system. I must admit, I have never found a better system.

2. Lawyers Gross Earnings & Salary Deducts: This last report on a yearly basis probably sums it all up. You can look at exactly what your gross earnings were, exactly what benefits you got from salary deducts that were not taxable to you and deductible to the law firm, and your total benefit that you got out of the firm on a given year. Again, it is very easy to look back over the years and see exactly where you have been and exactly what you have been able to achieve on a year to year basis. You can quickly see the up years and the not so up years. The one thing that I was hoping would be the case and in fact did turn out to be the case, was when I stopped subsidizing other lawyers, my income dramatically increased. When I was able to have the law firm pay for legitimate deductions for me with pre-tax dollars instead of post-tax dollars, I found myself in a better personal position financially. When I began to compensate myself for what I actually was achieving, I actually increased my total benefit from the firm 50%, and over the years that has grown to 100%. It has been a lot of hard work, but at least you are getting rewarded for all your hard work and your risk taking. Any time that you have the opportunity to increase your salary by 50% to 100%, you certainly owe it to yourself to look at the set of circumstances and see if that is something that you are going to be able to do. Running your own law firm is not for the faint of heart. Running your own law firm is not for those people who are totally risk adverse. But, if you are looking for an opportunity to spend time taking care of clients, minimizing your administrative duties, figuring out a way to have more fun and enjoyment in your practice, and to, overall, achieve a feeling of accomplishment, I would certainly recommend to each and every one of you to explore setting up your own law firm or at least a set of circumstances where you are rewarded based upon what you are able to achieve as opposed to somebody’s subjective observation about what you may be worth or entitled to!

Well, there you have it, hopefully everything you ever wanted to know about “billing” as the fourth element that makes up every business in the world. There really is no magic to it, it simply takes organization and information. If you can organize your business and get information that helps you manage your business, you will be able to achieve some success. On the other hand, if your business is totally disorganized and you cannot put your hands on any information that helps you manage your business, you are either doomed to total failure or at least a very long and tortured slow death!

We are going to begin talking about the last of the five areas of every business in the world. The last area is “collecting.” I think you will find some of my suggestions with regard to how to “collect” your bills to be very helpful to you.

Talk to you next week!

Jim Wirken is a civil trial attorney and the Chairman of the Board of The Wirken Law Group in Kansas City.